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Next 5,000 groups must ensure they keep current and accurate records to avoid lengthy and costly audits, the ATO has warned.
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Effective record keeping critical for preventing ‘costly audits’, ATO warns
10 February 2025
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7 minute read
In a recent update, the ATO has urged Next 5,000 groups to use its comprehensive Record keeping for business resources to ensure they meet their record-keeping requirements.
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The guide has an index of core record-keeping information for different groups so they can easily find what they need and an overview of the record-keeping rules they must follow.
It also explains how to set up and manage records and invoices and outlines what records they must keep at whatever stage of the business lifecycle they're in.
"We know that most Next 5,000 taxpayers want to get tax right and meet obligations effectively. That's why we’ll continue to provide you with the information you need," the ATO said.
The ATO said groups that are part of the Next 5,000 private groups tax performance program are expected to keep up to date and accurate records of their tax returns and business activity statements.
"If you don’t, you could face lengthy and costly audits potentially denying your deductions and input tax credits," it said.
The ATO said its regular and ongoing engagement with groups reveals that basic record keeping, including the substantiation of income and expenses, is not always maintained.
For example, the 2024 Next 5,000 findings report for privately owned and wealthy groups shows that, in some cases, deductions were denied because of poor record keeping.
"Claimants couldn’t substantiate their expenses, or they couldn’t provide acceptable evidence of the linkage between expenses and income," the ATO said.
"This was especially true for related party transactions for example, where one party’s reported income was less than the deduction claimed by their associated party."
The ATO reminded businesses they are required to keep records of all transactions relating to their tax, superannuation and registration affairs as they start, run, change or close their business.
This includes any documents related to their business's income and expenses and any documents containing the details of any election, choice, estimate, determination or calculation made for a business's tax and super affairs, including how the estimate, determination or calculation was made.
"To meet your record-keeping requirements and avoid common errors, ensure you understand what records are needed for your business and make accurate and complete record-keeping practices a part of your daily business activities," it said.
"As your business changes or grows, you may need to review what records you need to keep."
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